Patent creators say Microsoft lied to get better deal on DVR patents

Microsoft is facing a lawsuit that accuses the company of making fraudulent …

Microsoft is facing a patent lawsuit over its failed Ultimate TV DVR system. The lawsuit, filed by joint venture company Intellivision (no relation to the Mattel console), accuses the company of making fraudulent and misleading claims in order to acquire intellectual property without having to make royalty payments. Intellivision, formed by inventors Bruce Adams, Paul Hoffman, and John Daniels, sold its DVR intellectual properties to Microsoft for $1 million in 2001, allegedly with assurances from Microsoft that it only wanted the patents for "defensive" purposes and not to create a DVR system of its own. A week after the deal was sealed, Microsoft announced the Ultimate TV.

Intellivision says that its core inventions have been incorporated into a number of DVR systems, such as the TiVo and Replay TV, which include the ability to pause and rewind live TV, interactive on-screen guides, links embedded in video, and more. In all, they list more than 18 patents, including some filed in countries such as Japan. In our reading of the complaint, Intellivision appears to claim to have patents on some of the most fundamental DVR technology.

Microsoft allegedly expressed interest in the patents in order to properly defend themselves from infringement claims over already-existing DVR systems. "It was explained to Intellivision that Microsoft's interest in Intellivision's intellectual property portfolio was based on Microsoft's desire to build a portfolio of valuable patents to utilize for defensive purposes when challenged by others asserting claims of patent infringement," according to the complaint filed in January of this year.

According to the complaint, continued verbal statements made by Microsoft attorney Ronald Zink led Intellivision to "forego its demand for a per unit royalty" upon granting intellectual property rights to Microsoft. "Approximately one week after the parties' agreement was fully executed, Microsoft launched a national advertising campaign for its 'Ultimate TV' product," wrote the company, which it claims incorporates core technologies from Intellivision's patents.

Microsoft filed a motion to move the case to federal court late last week, but it has otherwise not made any formal response to the lawsuit thus far. If Intellivision's claim is true, Microsoft could be liable for loss of revenue and loss of opportunities to Intellivision. Intellivision seeks for the court to find that the company was "defrauded by Microsoft," rescind the agreement between the two companies, and award unspecified damages.